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You, Your Health, and the IRS: the New Health Care Team

August 19, 2009

Social engineering hasn’t worked: the government health care reform squads have failed to convince Americans to choose to purchase health care insurance, or to make it possible for them even to consider choosing to purchase health care insurance. If there was ever a Mr. Nice Guy, he is no more.

On the table are plans not to force anyone to buy insurance, but to tax them if they do not purchase insurance. The House version calls a tax a tax. The Senate is a little cozier: the tax is called a — ready? — “shared responsibility payment.”

You can read more details on this law professor’s blog. If the taxpayer fails to have insurance for any time during the tax year, he will be subject to a tax penalty, or a shared responsibility payment, depending on the prevailing version. The really efficient part of the plan is that the IRS will undertake the auditing of Americans’ tax returns to confirm existence and adequacy of insurance coverage. To make this possible, the IRS will now be privy to Americans’ health care records.

As of this pre-healthcare reform moment, I may still decline to provide a health care provider with my Social Security number. Under New Health Care, health care providers will be required to report to the IRS, the name, address, coverage period, and Social Security number of every single patient they see. The upside is the incredible number of medical records clerk positions that will be created to report our health care information to the IRS. As I have said in the past, “privacy” means everyone but me gets to see my medical records.

It seems apparent that only large health care corporations will have the resources to manage the information collection and dissemination the IRS will require. If he wasn’t already extinct, the entrepreneurial practitioner will surely become either obsolete or an ex-patriot when he is subsumed by the reporting requirements not only of insurers, but of the IRS as well.

Some Americans still pay cash for health care services. Providers typically charge them less because the provider does not incur the expense of billing an insurer, and does not receive the insurer’s much-discounted reimbursement. This practice will continue to be legal; however, the practice will be subject to be shared responsibility payment or tax penalty, because the practice will refer to individuals who do not meet the requirements of the pertinent IRS Code section. The penalty amounts to 2.5% of the excess of the taxpayer’s adjusted gross income over the IRS-designated poverty level for that year.

If health care is expensive now, how expensive will it be, given the new recordkeeping requirements and universal insurance? If everyone is forced to purchase insurance coverage, won’t everyone feel he has the right to get something he’s paying for anyway, and purchase services he doesn’t need and would not have purchased if he didn’t have insurance? Maybe this would be a great time for one of my neighbors to have those tattoos removed….

The government is dead wrong in its market scenario. The government theory is that if everyone purchases insurance, insurance costs will go down in accordance with an enlarged risk pool: non-users will offset heavy users. But the human design to get what one pays for will increase demand for services, which will cause services to become scarce, and hence expensive. And so insurance costs will not decrease, but will in fact increase, and so will the cost of health care.

But far be it for me to invoke logic when we have been discussing the IRS overseeing our health care.

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